January, 2013

Network development and regional integration

In recent years, the American health care system has experienced dramatic change and restructuring. One of the more noticeable changes -- one which is quite evident here in central Pennsylvania -- is a growing trend toward the formation of large, integrated health systems. Many different factors are driving this trend, including health care reform legislation, other changes in how health care is paid for, economic factors affecting the financial performance of hospitals and providers, and a growing focus on the need to improve the safety and quality of care. As we look to the future, even more dramatic restructuring lies ahead, and Penn State Hershey must be prepared for a future in which larger and well-integrated health systems are the norm.

We have already made great strides toward developing a more integrated approach to care, through the growth of the Penn State Hershey Health System that expands our network of affiliations and partnerships. In the future, we will need to focus even more heavily on growing our network, not only in order to remain financially strong, but also to better serve the health and well-being of our patients and our region. Our announcement last month of a new agreement with Holy Spirit Health System to provide cardiovascular surgery services is just the most recent example of how we are working in collaboration with other health care organizations to expand access to expert care and the resources of our academic health center, while at the same time making it easier for more patients to receive this care as close to home as possible. Agreements like our new cardiovascular partnership with Holy Spirit offer opportunities to improve patient care while at the same time increasing efficiency and controlling costs.

Before looking at some of the other ways in which Penn State Hershey is developing its network, it's worth taking a closer look at the trend toward more integrated systems. America's current health system is expensive and often inefficient, in part because health care is fragmented, resulting in delays in care, duplicated tests, and other inefficiencies. Hospitals and clinicians are still largely reimbursed on a fee-for-service or utilization basis; in other words, we are paid more for doing more to treat people once they are sick. In an outcome-driven, value-based system, we will be paid to keep the population we serve healthy. Health care reform is driving this transition, particularly by encouraging the formation of Accountable Care Organizations (ACO), which will provide care for a population of patients and be reimbursed on the basis of keeping their patient population as healthy as possible, improving health outcomes and health care quality, reducing costs, and enhancing access. Integration is the defining characteristic of ACOs and similar networks or health systems; these systems will include community, specialty, and tertiary/quaternary care hospitals, primary care and specialist physician practices, urgent care sites, home health, and long-term care.

The development of more integrated health systems and networks poses potential challenges for hospitals, physician practices, and other health care organizations. Changing patterns of ownership, affiliation and control will in turn have an impact on referral patterns; for example, a formerly independent physician practice group or community hospital that becomes part of a larger health system will no longer be as likely to refer patients to physicians or facilities that are not part of that same health system. Thus, as consolidation takes place, there is the potential for increased competition for patients and services. Recent regional developments that reflect the drive toward greater integration include community hospitals being acquired by health systems based in Danville and Pittsburgh, plans for a new hospital in Mechanicsburg, the purchase of independent medical groups by regional hospitals and health systems, and aggressive marketing by health systems based in Philadelphia and Baltimore.

In this rapidly changing environment, Penn State Hershey cannot simply assume that patients will continue to come to us as they have done in the past. Instead, we must seek out opportunities to build and expand our health system. That said, as an academic health center, we have certain advantages as we look to develop our network. Academic health centers like Penn State Hershey offer many unique features that are of value both to patients and to prospective partners, affiliates and referring providers. Frequently, we can offer access to highly specialized treatments that are not available at most community hospitals, making us an important part of any health system that seeks to offer a full range of services for patients. At the same time, for academic health centers, becoming part of a larger health system network can create additional learning opportunities for medical students and other trainees, as educational programs are expanded to include other hospitals and clinics within the network. Trainees are not the only ones who benefit from this process; as we have seen in the development of our Regional Medical Campus at University Park, clinicians in community hospitals and practices frequently welcome the chance to take part in teaching the next generation of health care professionals. Similarly, a growing network increases our access to patients to participate in clinical trials research that offers the hope of discovering new treatments and cures.

In addition to some of our partnerships already mentioned, some of the other recent steps we have taken to expand our health system include new clinical affiliations with other hospitals in the region to provide specialty services; some examples include our partnership with Lancaster General to provide pediatric services and our Penn State Hershey Cancer Institute affiliations with Carlisle Regional Medical Center, Lancaster Regional Medical Center, and Heart of Lancaster. We have also continued to grow our own Penn State Hershey Medical Group, adding clinic sites and services with an emphasis on making outpatient care more convenient and accessible throughout our region. The continued growth of our Penn State Hershey Rehabilitation Hospital and our partnership in home health and infusion services through Horizon are other examples of how we are offering a greater spectrum of health care services.

Ultimately, integrated health care systems have great potential to benefit patients. Integration can lead not just to cost efficiencies, resulting in savings for patients as well as for the health system itself, but also more coordinated care resulting in improved quality and better health outcomes. Because integrated systems include a full array of specialty services as well as primary care, they can also make it easier for patients to get access to the type of care they need. With the evolution of health systems and networks into Accountable Care Organizations focused on keeping a population healthy, individual patients and the community as a whole can reap the health benefits of a greater emphasis on prevention, wellness, and disease management.

Penn State Hershey, as the region's only academic health center, is in a strong position to develop and expand our network. But we cannot rest on our laurels. We must continuously make the case for the value of the care we provide, the expertise of our clinicians and researchers, and the strength of our commitment to improving health and well-being in communities throughout central Pennsylvania.


Harold L. Paz, M.D.
Chief Executive Officer, Penn State Hershey Medical Center
Senior Vice President for Health Affairs, Penn State
Dean, Penn State College of Medicine